Houston Bankruptcy Attorneys FAQ
Katy Bankruptcy Lawyers providing Chapter 7, 11 & 13 Bankruptcy Frequently Asked Questions
When individuals are unable to pay their bills, they can file for bankruptcy to immediately stop all creditors from trying to collect on their debts. Bankruptcy also provides a process in which a federal bankruptcy court eliminates or determines the process by which debt will be repaid. Bankruptcy could also stop foreclosure on your home, prevent dispossession of property, or halt wage garnishment.
What kinds of bankruptcy are available for consumers?
There are four basic types of bankruptcy available under federal law.
- Chapter 7: a debtor gives up property which exceeds certain limits or exemptions to allow the property to be sold to pay creditors
- Chapter 11: used by businesses and individual debtors who have large debts
- Chapter 12: limited to family farmers or family fisherman
- Chapter 13: a debtor files a plan with the court to pay debts (or part of debts) from existing income
Consumers typically file either Chapter 7 or Chapter 13 bankruptcy.
What is Chapter 7 bankruptcy?
Under Chapter 7 bankruptcy, a debtor files a petition with the bankruptcy court. The debtor must then sell certain non-exempt property to satisfy debts owed to creditors. Property owned by a debtor will often be considered exempt. A bankruptcy lawyer can be very helpful in ensuring that a debtor petition is filed properly, and that the debtor understands which property has exempt status.
What is Chapter 13 bankruptcy?
Under Chapter 13 bankruptcy, debtors file a plan with the bankruptcy court indicating how they plan to pay off their debts over the next three to five years. A bankruptcy lawyer can assist a debtor in determining which debts must be paid in full or in part.
What is Houston Chapter 11 bankruptcy?
Under Chapter 11 bankruptcy in Houston, a debtor (a corporation, sole proprietorship, or partnership) proposes a plan of financial reorganization to keep its business viable and pay creditors over an extended period of time. Selling off the assets of the business to pay debts or monetary relief are available options, but these may not be enough to cover all of the indebtedness.
How should I file for Chapter 11 bankruptcy?
For best results, begin by engaging a qualified Chapter 11 bankruptcy lawyer in Houston. Your attorney will help ensure that Chapter 11 is the right choice for you before beginning the process.
The process begins with filing a petition in the U.S. District & Bankruptcy Courts for the Southern District of Texas in Houston. The petition can be filed by either the debtor or by the debtor’s creditors. In addition, the debtor also has to file a number of schedules to show current financial position.
The bankruptcy court appoints a U.S. trustee—an individual or an institution such as a bank—who appoints one or more committees to represent creditors and any stockholders. Together, these committees work with the debtor company to reorganize for debt relief. They develop a plan for the bankruptcy court’s approval.
The court authenticates the plan or can decide to reject it. Even if creditors vote to disallow the plan, the court can choose to ignore the vote.
While filing Chapter 11 bankruptcy results in reorganization, it can also result in liquidation and the monies gained through the sale of the company’s assets reimburse the company’s creditors.
Should I file for bankruptcy under the Federal Rules or the State of Texas Rules?
Your petition can either be filed pursuant to the Federal Rules or the State of Texas Rules of Bankruptcy. Each has their separate advantages as well as certain disadvantages. Which Rules are used is dependent on your particular fact situation. Generally, the Texas Rules are generous with property and not so generous with liquid assets. The Federal rules are just the reverse. Thus, the rule of thumb is if you have a house, you use the Texas Rules; if not, you use the Federal Rules. However, it is important to remember that each case is completely dependent on its own set of facts, and these facts will determine under which set of Rules your case will be filed.
What can I expect from the bankruptcy process in the Houston area?
Once your bankruptcy petition has been filed, your case will be set in approximately 30 days for your §341 creditors meeting. This meeting will occur on the third floor of the Federal Courthouse located at 515 Rusk in downtown Houston. For most creditors, this will be the only meeting in which your attendance is required. The meeting is conducted by an individual referred to as the TRUSTEE. It is his responsibility to review the petition of the debtor for any assets which can be recovered for the benefit of creditors, should such assets exist. You will need to bring a photo ID (Drivers License) and proof of your Social Security number, (SS Card, or some document which has the number on it such as your most current tax return). You will also be asked to provide proof of the existing balance of all bank accounts that existed on the date your petition was filed. This is simply done by providing a copy of your bank statements that include this date.
The §341 creditors meeting lasts between 10 to 15 minutes for the average consumer bankruptcy case. The meeting can be longer, it really depends on the complexity of your case, (example: the Petitioner(s) own a business). If the Trustee needs further information he/she can continue the hearing to a later date. For the average case however, the creditors meeting will be the only time you will need to appear at the Courthouse. At the conclusion of the Creditors Meeting, the Trustee will make a determination as to whether your case is a no asset case or an asset case. If your case is labeled as a no asset case then the Trustee will recommend to the Court that you be discharged from your debts. The Order granting this discharge occurs anywhere for 60 to 90 days after the Creditors Meeting. If, on the other hand, the Trustee has determined that assets exist, it will be the trustee's job to collect the assets and distribute such assets to all creditors who have filed a Proof of Claim. Once all of the assets have been allocated, the Court will grant your discharge.
Please note that the above is a very simple description of the bankruptcy process. Each case is different and the process will vary depending on the specific facts of your case.
How does bankruptcy affect foreclosure? Will I lose my house?
Filing for bankruptcy can stop foreclosure and give you a chance to make up for missed payments. Mortgages and liens on your home will not be eliminated by filing for bankruptcy.
Whether you get to keep your house depends on the amount of equity you have in your home. In Texas, individuals can claim the Homestead Exemption, which does not require a specific equity value for a debtor to claim the exemption. Individuals claiming this exemption must also meet certain residence and property requirements to claim exemption. It is recommended that you contact a bankruptcy lawyer to see if your home meets the requirements for the Homestead Exemption.
What happens to my house and property if I file for bankruptcy?
Depending on the type of bankruptcy that you file, you could be forced to sell all of your property to meet your financial obligations. Alternatively, you may meet some of the requirements to claim an exemption on your home, as well as on your other property, such as a car. Whether you will be able to keep your property depends on your equity in the property, the current value of the property, the amount of debt owed, and other factors specific to each debtor's situation.
Do I need an attorney to file a bankruptcy?
Federal law does not require a bankruptcy petitioner to file with the help of an attorney. However, it is highly recommended that all debtors file for bankruptcy with the assistance of a bankruptcy attorney. Bankruptcy attorneys with experience filing petitions, negotiating with creditors, and dealing with trustees ensure that debtors have their rights protected and that debtors are able to start over financially at the conclusion of a bankruptcy proceeding.
